Japan's DoCoMo expected not to bid

Rumors abound of a $35 billion takeover bid for AT&T Wirelss, and Vodafone's silence is doing nothing to douse speculation. Story Tools YOUR E-MAIL ALERTS

TOKYO, Japan (Reuters) -- Japan's NTT DoCoMo Inc was expected to decide against bidding for U.S. wireless operator AT&T Wireless Services on Friday, leaving the field clear for Cingular Wireless and Vodafone Group Plc.

Top executives of Japan's biggest mobile phone operator will meet this evening and are likely to vote against participating in the $30 billion-plus auction for the third-biggest U.S. wireless operator, company sources said.

The Wall Street Journal on Friday reported that Britain's Vodafone was preparing an offer valued at about $12.50 a share, or $34 billion, while Cingular, the number two U.S. mobile phone operator, was scrambling to top that. AT&T Wireless shares closed at $11.67 on Thursday.

Cingular has already submitted a $30 billion informal bid for AT&T Wireless, which set February 13 as the deadline for offers.

"Our view is that Cingular is going to be the company that ends up buying AT&T Wireless," said Kirk Boodry, global telecoms analyst for Dresdner, Kleinwort Wasserstein.

Japanese newspapers reported that DoCoMo, which owns a 16 percent stake in AT&T Wireless, had decided against participating in the auction for the U.S. company, but company sources told Reuters no final decision had been made.

They said the situation had not changed since Reuters reported on January 23 that a bid was unlikely because of setbacks in previous attempts to expand overseas, lack of experience in managing a non-Japanese company and the huge cash outlay involved.

$5bn stake

By contrast, DoCoMo could raise more than $5 billion if it instead sells its AT&T Wireless stake to a cash bidder. DoCoMo is the largest individual shareholder.

DoCoMo shares closed up 2.3 percent on the Tokyo Stock Exchange on the newspaper reports, outperforming the Nikkei average, which ended up 0.94 percent.

Analysts and company sources had previously said DoCoMo would probably not bid, also because of possible U.S. political opposition and competition in a cut-throat U.S. wireless market.

DoCoMo, which is Asia's second-most valuable stock with a market value of $104 billion, declined to comment.

Despite opposition from most DoCoMo executives, Chief Executive Keiji Tachikawa is said by sources to be interested in acquiring AT&T Wireless, in part due to his relationship with it in the late 1980s as president of NTT America. Tachikawa made the final decision to initially invest in AT&T Wireless in 2001.

If DoCoMo does not participate in the auction, it will have to decide what to do with its stake in AT&T Wireless.

Most analysts and company sources believe DoCoMo will hold on to its shares to keep its fingers in the U.S. market.

But it could potentially sell its 432.99 million shares for about $5.41 billion if there were an offer of $12.50 cash per share. Most of that would be considered a profit since the company has written down the bulk of its initial investment.

That income might be tempting, especially since DoCoMo could be facing its first ever profit decline in its fiscal year ending March 2005 as competition increases and voice usage declines.

If Britain's Vodafone were to acquire AT&T Wireless, it might be difficult for DoCoMo to keep its stake since it competes with Japan unit Vodafone Holdings K.K.

If DoCoMo keeps its shares, opinion is divided on whether it would increase its investment to maintain its stake in a merged company. Deutsche Bank Securities in a research note estimated that DoCoMo would need to invest another 200 billion yen ($1.90 billion) to 300 billion yen.

"DoCoMo does not need cash and will want to keep a foothold in the North American market, so we think the company is likely to keep its current shares without increasing its investment if Cingular were to acquire AT&T Wireless," said Deutsche Bank telecoms analyst Testuro Tsusaka in a research note.

Shares of AT&T Wireless have risen more than 46 percent since the beginning of the year in anticipation of a deal, valuing the company at about $31.7 billion. ($1-105.34 yen)

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